Changes to the Insurance Model – Prevention and Cure?

Changes to the Insurance Model – Prevention and Cure?

What is Insurance? An old boss of mine articulated it nicely when he said it’s about putting customers lives back on track when things go wrong. Now that is great, in fact in my opinion it’s more than great, but what if it was even more than that … what if it was about helping our customers to minimise the risk in the first place? A shift from the traditional insurance model of risk resolution to a dual risk resolution & risk prevention model.

Over the last few years we have seen a huge explosion in the use of new technologies across the financial services landscape whereas in insurance we have been focusing on the adoption of “digital,” mainly within the distribution & to a lesser extent the servicing channels. However, over the last 12 months we are seeing a real increase in new insurance start-ups and the birth of “Insurtech”. Looking in a bit more depth at these start-ups they tend to fall into one of 2 distinct camps, those who are creating new digitally led propositions (essentially selling a traditional insurance policy with similar processes) which to me looks & feels like more of a marketing play. Then there are those that are starting with a blank piece of paper, companies like Lemonade or Friendsurance who are introducing P2P insurance, or the likes of Trov & Cuvva who are introducing “On demand Insurance”. It is this second area that really excites me and potentially poses the biggest threat or opportunity to the more traditional providers.

But does this go far enough?

Imagine if we could (and we can) use technology to prevent claims occurring in the first place, or at the very least minimise the impact of a claim.

Imagine if we could turn the whole Insurance model on its head.

We currently have connected houses – you can already do things like turn your lights on, check your doors are locked remotely. Companies like Augury create sensors that identify water leaks which in turn helps prevent or minimise the impact of an Escape of Water claim. These claims currently cost the industry ~ £630m pa in domestic claims alone as well as clearly having a significant impact on our customers. This surely presents a huge opportunity for the GI business to own this revolution.

If I was a customer who was offered a risk prevention policy that paid out when I needed it but gave me more…. gave me the peace of mind that I was less likely to suffer a claim in the first place well I might just go for that! Hopefully if I ask the question “what is Insurance?” in 5 years I might just get a different answer.

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